This time last year when 10yr yields were at 2.86 the night before NFP, I remember thinking about where we might be by the end of 2013 and then about what 2014 would look like.  Perhaps it was because the past 6 months had been so cruel and depressing, but I figured (or hoped?) we would catch a breather into the end of that year, but then worried that yields would make new highs in 2014.

Well surprise surprise!  The end of 2013 ended up seeing yields run up over 3% again and 2014 has been one massive, gentle, awesomely paradoxical rally (paradoxical when viewed through the historical lens, but of course we can account for it now thanks to Europe...  again).

So this year, the stakes don't seem quite so high, and the fallout from bad bond market news seems less dire. 

The Fed is done putting new money into MBS, yet spreads have remained nothing if not incredibly stable.  The Fed is done buying Treasuries and we're no worse for the wear.  From Spring 2014 on, European markets have kept domestic rates grounded.  Most importantly, that's prevented any really awful selling sprees.  They just don't make a lot of sense when most European countries have lower sovereign debt yields than the US.

In fact, as opposed to being concerned about bond markets at the end of this year, it probably makes more sense to wonder how well they will do between now and the time that Europe turns its next big corner.  Right now, the 2.35% level in 10yr yields has been a pretty epic inflection point.  It's not the sort of thing that provides perfect support (obviously, considering we hit 2.40 on a few occasions recently), but stepping back to a wider view, that's essentially what's been happening: a big old supportive bounce at 2.35. 

With yields at 2.25 the day before NFP and an approximate 10bp yard-stick to measure the average "bad reaction" to NFP, bonds would have to have a really really bad day in order to challenge that long term inflection point.  And even if they did, that would only bring yields back to the mid-point of the year-long rally trend in the lower half of this chart.  2014 has been a good year.